The end of Wiggle and Chain Reaction. According to sources close to the company, Wiggle and Chain Reaction have mass redundancies across the organization that are related with the sale of the business. In layman’s terms this means that the entity that is acquiring the business has no need for the personnel.

All over Linkedin former employees of the companies are changing their status to #opentowork and indicating that their time at the organization is over. Unconfirmed reports indicate that the new owners will be buying the only the intellectual property (Brand, Web Site, Email Subscribers).

While this is undoubtedly tragic for the families left without work due to the unfortunate situation, there is one part of this story that is not being told. Throughout the 2010s Wiggle devastated IBDs across Europe, Australia and USA. The company used their direct-to-consumer strategy and aggressive pricing to take large chunks of market share in multiple categories.

Aggressive Pricing Strategy

From the outset, Wiggle and Chain Reaction would buy directly from manufacturers, thus cutting out the distributor from the value chain. This is a built-in competitive advantage that all large online retails have. They decided to pass along these savings directly to the consumer to quickly gain market share.

Because of this structural pricing advantage, Wiggle quickly began chipping away at market share for clothing, helmets, and shoes. It was not uncommon to see the same products available in IBDs on Wiggle and CRC discounted up to 30%. This was before COVID when discounting was much less common.

Effects on the IBDs

Their strategy led to the phasing out of many brands and almost entire categories altogether from the IBDs. Clothing distribution in bike shops has been whittled down to just a few brands in Europe. It made no sense for small bike shops to stock clothing that often has seasonality, sizing, and color variants. Just to have the customer open their web browser to find the same product for 30% less on Wiggle or Chain Reaction. This was also the case for any category with sizes or seasonality like helmets and shoes.

MAP Pricing Loophole

As I mentioned earlier, Wiggle would often buy directly from manufacturers and pass along the savings directly to consumers. They could undercut the entire USA market by going around the strong Map pricing policy, which prohibits US based retailers from selling products below list price. This is not case in Europe and therefore Wiggle and Chain reaction were like wolves in the hen house for years.

I found an article all the way back in 2011 in which Competitive Cyclist accused Wiggle and Chain Reaction of “Exploitation”. The source was quoted as saying: “They leverage their savings by selling the goods in foreign markets such as the US where distributors and importers normally add a layer of markup. Because of this, the retail prices at Chain Reaction Cycles and Wiggle are upwards of 30 to 40 percent less than what you’ll find in American retail stores – whether it’s your local bike shop, or at Competitive Cyclist.” This was the same for IBDs across Europe and Australia.

Since Wiggle and Chain Reaction relied so heavily on pricing to remain competitive in the marketplace, COVID and the aftereffects left them particularly vulnerable as their razor thin margins left very little ‘wiggle’ room.

We all now know how that went.